The latest data released by the FAO Food Price Index show a drastic increase in the prices of Dairy, Sugar, Cereals, and Vegetable oils since the start of 2014. The FAO Food Price Index is a measure of the monthly change in international prices of a basket of food commodities. It consists of the average of five commodity group price indices, weighted with the average export shares of each of the groups for 2002-2004.
Breakdown» The FAO Food Price Index averaged 208.1 points in February 2014, 5.2 points, or 2.6 percent, above a slightly revised index for January, but still 2.1 percent less than one year ago. Last month’s rebound, the sharpest witnessed since mid-2012, resulted from strengthening quotations of all the commodity groups making up the index, except meat, which fell marginally. The products that have incurred the strongest rises since last month were sugar (+6.2 percent) and oils (+4.9 percent), followed by cereals (+3.6 percent) and dairy (+2.9 percent).
» The FAO Cereal Price Index averaged 195.8 points in February, up 6.8 points, or 3.6 percent, from the previous month and the strongest rise registered since July 2012. Last month’s price bounce mainly mirrors concerns over wheat crops in the United States, a brisk demand for coarse grains for both feed and biofuel and strong Japonica rice prices. Yet, cereal prices remain, overall, 18.8 percent below their level in February last year, a clear sign that the world supply/demand situation has eased considerably compared to last year.
» The FAO Vegetable Oil Price Index averaged 197.8 points in February, up as much as 9.2 points (or 4.9 percent) from January, sustained primarily by firmer prices for palm oil and soy oil. The palm oil market strength mainly reflects concerns over dry weather in some major production areas in Southeast Asia, together with buoyant demand worldwide, including from biodiesel producers. As for soy oil, quotations rose on fears that unfavourable weather in South America could negatively impact soybean crops.
» The FAO Dairy Price Index averaged 275.4 points in February, a rise of 7.7 points, or 2.9 percent, over January. Demand for all dairy products remains firm, especially from North Africa, the Middle East (SMP and WMP) and the Russian Federation (butter). Limited supplies have lent support to prices, with the index currently standing 31.3 percent above its level in February 2013. Mild weather in some regions of Western Europe has provided the basis for a strong start to the 2014/15 season, which will only peak in April-May. Meanwhile, export supplies in Oceania remain limited.
» The FAO Meat Price Index averaged 182.6 points in February, only 0.5 points below its revised January level. In general, prices were little changed for the various categories of meat. Looking at longer-term trends, compared to February 2013, the reduced cost of feed has contributed to some decline in prices for poultry and pig meat. On the other hand, for the same period, bovine meat prices are at almost the same level, while limited export supplies have lent support to sheep meat prices.
» The FAO Sugar Price Index averaged 235.4 points in February, up 13.7 points, or 6.2 percent, from January. Following a three-month decline, sugar prices recovered in late February, prompted by concerns of crop damage from dry weather in Brazil, and recent forecasts pointing to a potential drop of output in India.